How Rising Interest Rates Are Impacting First Home Buyers In Melbourne

If you’re a first home buyer in Melbourne, it’s likely that you’ve been keeping up with the latest movements in the market. From staying on top of the latest property prices to comparing first-home buyer loans, there’s a lot that goes into buying your first home. 

An important aspect to consider when buying your first home are decisions made by the Reserve Bank of Australia (RBA) regarding the nation’s cash rate. In this blog post, we’ll examine the influence the RBA has over home loan interest rates and what this means for first home buyers. 

The role of the RBA in the Australian housing market

The RBA, or Reserve Bank of Australia, is primarily concerned with the control of monetary policy, particularly by setting the cash rate. The cash rate influences the interest rates banks charge for home loans, directly affecting borrowing costs for potential homeowners and investors. 

When the RBA lowers the cash rate, borrowing money becomes cheaper, often stimulating demand for housing and increasing property prices. On the other hand, when the RBA raises the cash rate, borrowing becomes more expensive, cooling down demand and potentially slowing house price growth.

At the time of writing, the RBA has decided to hold the cash rate at 4.35% since November 2023 due to high inflation. RBA governor Michele Bullock has noted that there are no future plans to cut the cash rate until there is definitive proof inflation has fallen. 

First home buyer interest rate strategies

When considering the 2024/2025 Melbourne property market, borrowers and sellers naturally wonder how they can stay ahead financially. And with the RBA putting cuts on pause for the foreseeable future, we’ve listed a few recommendations for first-home buyers: 

• Investigate Melbourne first home buyer grants — To assist with housing affordability in Melbourne, government assistance is available. Depending on the grant you select, you could receive a one-off payment to help fund your purchase or have your stamp duty waived. 
• Shop around on your home loan — One of the best things you can do for your budget is to compare new home loan options. Home loans come in a range of options, with every lender offering different rates, fees and more. Not sure where to start? An experienced Melbourne mortgage broker can simplify the process. 
• Determine your best option with fixed vs. variable rates — In Melbourne, borrowers have the choice between a fixed or variable rate. With the cash rate not expected to hit 3.2% until the middle of 2026, ensure you select the right rate that aligns with your budget and overall financial strategy. 

Work with some of the best mortgage brokers in Australia at Clark Finance Group

Whether you’re a first-time buyer, investor or refinancer, Clark Finance Group is here to help you find the best loan for your needs. Our Melbourne mortgage brokers do all the heavy lifting, sifting through more than 50 lenders to ensure you find the right fit. We’ll compare mortgage rates for first home buyers and prepare your application on your behalf, all you need to do is get ready to walk into your new home.

For more information about our brokerage services, please contact us today for a free consultation.